[jolepp]

WASHINGTON — The recent financial crisis left the median American family in 2010 with no more wealth than in the early 1990s, erasing almost two decades of accumulated prosperity, the Federal Reserve said on Monday.

The median family, richer than half of the nation’s families and poorer than the other half, had a net worth of $77,300 in 2010, down from $126,400 in 2007, the Fed said. The crash of housing prices explained three-quarters of the loss.

This vast loss of wealth was compounded by a loss of income, as the earnings of the median family fell by 7.7 percent over the same period.
...

http://www.nytimes.com/2012/06/12/business/economy/family-net-worth-drops-to...-fed-says.html

[mikemike]

Failed policies | NOLA.com

Luckily for me, my family's net worth has gone from slightly negative in 2007 (my wife's student loans) to a little above the median in 2010 and has only gone up from there. I don't know if I should really be bothered by this since it doesn't seem to apply to us.

[Nesster]

Mike, you are indeed in a good position. However there is a web of life, a village, a community... what goes on in the bigger context will at some point, though no fault of your own, come to bite or benefit you.

In the financial industry, many old timers have seen their incomes roll back to late '90s levels - one guy I hired in early 91 or so and became an IT manager recently told me his pay is now less than what he was hired at (as programmer/analyst). Granted, we all had a good run while things were booming, till the early 2000's that is. Benefit costs have gone way up, and the company stock everyone got 'paid' in is still down 80-90% for most companies. And there's no near term change in sight to this.

In this context the local economies that feed off the financial industry are going to be suffering longer. House prices can't bounce back - the foreclosures are slow to hit, and due to the decline in incomes and equity compensation, there's little new money coming into that market. Should someone have got out before the crash, and should they have decided to rent, they are doing great - everyone else is not. This isn't necessarily sheer stupidity, but rather certain assumptions no longer hold. Why they do not hold can be traced to certain decisions made by senior managements and traders in the financial industry.

[Nesster]

Looking at this excluding house prices:
Net Worth Implosion: It's Not Just Housing - Yahoo! Finance

Americans' net worth collapsed in recent years, but don't blame the housing market for it all.


A CNNMoney analysis of new Census Bureau data shows that if you strip out the effects of the housing collapse, median household net worth still fell by 25% between 2005 and 2010. The decline was driven largely by the plummeting stock market, which devastated Americans' portfolios and retirement accounts.


Overall, median household net worth declined 35% to $66,740 in 2010.


The median worth of stock and mutual fund portfolios fell 33%, while the median home equity value dropped 28%.


"One of the significant factors is housing, of course, but it's not that alone" said Alfred Gottschalck, an economist with the Census Bureau. "It's how business conditions affect stock and retirement accounts."


The estimates are generally in line with what other government reports have found. Last week, the Federal Reserve released its triennial study that showed median family net worth overall dropped nearly 40%, between 2007 and 2010. The Fed surveys a smaller number of people.


But unlike the Fed study, the Census Bureau also looks at wealth changes excluding home equity. So it provides a clearer look at other factors affecting net worth.


The Great Recession -- including the housing and stock market collapses -- wiped out nearly 30 years of net worth gains for the typical household.


"The median household is no wealthier than they were in 1984," said Scott Winship, economic studies fellow at Brookings Institution.

That wonderful financial engine that lured us with visions of at least comfortable retirement has vaporized for now. While the younger have lost more they also have longer to make up for the losses, while those getting closer to retirement are seeing retirement recede.

Imagine if we'd had private Social Security investment accounts! They'd be looking a whole lot worse about now, with the main beneficiaries being the bankers pocketing all the fees.

The simple math about loss vs gain. Say you have an asset valued at $100 and it declines to 50. That's a 50% decline. How much, percentage wise, do you need to get back to $100? 100%. This is asymmetry.

I note that the portion of my compensation that was in company stock, 6 figures worth before the crash, went down 95+% before recovering some -- I need it to go up 13 times its current value for me to regain what I had been paid originally. That's a retroactive pay cut!

[GeneV]

Things that have gone down in value: My house, my stock portfolio, my mutual funds, my 401k. Things that have not gone down (yet) my Social Security payments in 10 years.

[apisto]

...I don't know if I should really be bothered by this since it doesn't seem to apply to us.

That's the spirit!